2021 Business Organisation and Management BOM Solved Question Paper, Dibrugarh University, B.Com 1st Sem Non Hons

  Business Organisation and Management BOM
Solved Question Paper 2020-21 (December)
1 SEM TDC BOM (CBCS) DSC CC 103
2 0 2 1 (March)
COMMERCE (Discipline Specific Course)
Paper: CC–103
Full Marks: 80
Pass Marks: 32
Time
: 3 hours

The figures in the margin indicate full marks for the questions

1. Answer the following questions as directed:

a) What is meant by liberalization of economy? 1             

Ans:  liberalisation refers to a reduction or elimination of government restrictions in the areas of social, political and economic policies.

b) ‘Make in India’ and ‘Made in India’ denote same meaning.     1 (Write True or False)

Ans: Flase

c) Promotion is an Internal source of recruitment. (Fill in the blank)

d) Mention two functions of ‘Securities and Exchange Board of India’ (SEBI).       2

Ans: Regulates the operations of depositories, regulates the operations of stock exchanges.

e) Write the full form of MSME.                1

Ans: Micro, Small and Medium Enterprise.

f) Mention two principles of management evolved by Henry Fayol.         2

Ans: Unity of Command, Unity of Direction

2. Give short accounts on the following:                               4×4=16

a) Importance of Service Sectors.

Ans:

b) Importance of Planning.

Ans: Planning is of vital importance in the managerial process. No enterprise can achieve its objectives without systematic planning. “Planning is the heart of management” The following points highlight the importance of planning function of management:

a.      Planning provides directions: By stating i n advance how work is to be done, planning provide direction for action. If goals are well defined, employees are aware of what the organisation has to do and what they must do to achieve those goals. Departments and individuals in the organisation are able to work in coordination. Planning keeps the organisation on the right path.  If there was no planning, employees would be working in different directions and the organisation would not be able to achieve its goals efficiently.

b.      Planning reduces the risks of uncertainty: Business enterprises operate in an uncertain environment and face several types of risks. Planning enables these enterprises to predict future events and prepare to face the unexpected events. With the help of planning, managers can identify potential dangers and take steps to overcome them. Thus, planning helps risk and uncertainty.

c.       Planning facilitates decision-making: Decision-making involves searching for various alternative courses of action, evaluating them and selecting the best course of action. Under planning, targets are laid down. With the help of these targets, managers can better evaluate alternative courses of action and select the best alternative. Plans lay down in advance what is to be done and how it is to be done. Therefore, decisions can be taken with greater confidence.

d.      Planning reduces overlapping and wasteful activities: Since planning ensures clarity in thought and action, work is carried on smoothly without interruptions. There is no confusion and misunderstanding. Useless and redundant activities are minimized or eliminated. It is easier to detect inefficiencies and take corrective measures to deal with them.

e.       Planning promotes innovative ideas: Planning is thinking in advance and, therefore, there is scope of finding better ideas and better methods and procedures to reach the objectives/goals of the enterprise. This forces managers to think differently about the future of the organisations from the present. Thus, planning makes the managers innovative and creative.

c) Communication Barriers.

Ans: Communication is the process of passing information and understanding from one person to another, anything that obstructs the free flow of communication is referred to us Barrier of communication. E.g. Problem in encoding and decoding, wrong or defective communication channel, noise in the channel etc. Barrier may arise at any of the following level:

a)      Sender oriented,

b)      Receiver oriented

Sender-oriented barriers could be voluntary or involuntary. At any cost, efforts should be made on the part of the sender to identify and remove them. As the sender is the originator of communication, he should be extremely careful not to erect barriers. If his interaction gives rise to or indicates that there are barriers, the communication comes to a grinding halt. Some of the barriers that are sender-oriented are as follows:

1. Organizational barriers (SENDER’S ORIENTED)

2. Semantic barriers (SENDER’S ORIENTED)

3. Mechanical barriers (SENDER’S ORIENTED)

Receiver can also have some barriers in the course of the interaction. Although his role in the initial phase is passive, he becomes active when he starts assimilating and absorbing the information. He is equally to blame if the situation goes awry and communication comes to a stop, or there is miscommunication. Some of the barriers emanating from the side of the receiver are as follows:

1. Physical barriers (RECEIVER’S ORIENTED)

2. Socio- psychological or personal barriers (RECEIVER’S ORIENTED)

d) Product Life Cycle.

Ans: Product Life Cycle

A product is like a human being. It is born, grows up fast, matures and then finally passes away. Product life cycle is the stages through which a product or its category bypass. From its introduction to the marketing, growth, maturity to its decline or reduce in demand in the market. Not all products reach this final stage, some continue to grow and some rise and fall. In short, The PLC discusses the stages which a product has to go through since the day of its birth to the day it is taken away from the market.

However, the basic difference in case of human beings and products is that a product has to be killed by someone. Either the company (to bring better products) or by competition (too much external competition). There are several products in the market which have lived on since ages (Light Bulbs, Tubelights), whereas there are others which were immediately taken off the shelf (HD DVD).


Product Life Cycle

3. (a) Describe the role played by the Small Manufacturing Enterprises in the economic development of a country.11

Ans:

Or

(b) Explain the concept of ‘Globalization’. Discuss its advantages.4+7=11

Ans: Meaning of Globalisation

Globalizations are the outcome of the policies of liberalisation and privatisation. Globalisation is generally understood to mean integration of the economy of the country with the world economy, it is a complex phenomenon. It is an outcome of the set of various policies that are aimed at transforming the world towards greater interdependence and integration. It involves creation of networks and activities transcending economic, social and geographical boundaries.

Globalisation involves an increased level of interaction and interdependence among the various nations of the global economy.  Physical geographical gap or political boundaries no longer remain barriers for a business enterprise to serve a customer in a distant geographical market.

In simple words, The term globalization can be defined as the opening one's economy toward the world economy. It means to integrate the domestic economy with world economy. The govt. of India under the prime minister ship of P. V Narasimha introduced liberalisation, privatisation and globalization during 1991 .Due to globalization the multinational corporations have been very popular. These corporations transact their business activities more than one countries.

Benefits of Globalisation

a)      Increased Competition: One of the most visible effects is the improved quality of products due to global competition. Customer service and the ‘customer is the king’ approaches to production have led to improved quality of products and services. As the domestic companies have to fight out foreign competition, they are compelled to raise their standards and customer satisfaction levels in order to survive in the market.

b)      Employment: With globalisation, companies are moving towards the developing countries and hence generated employment for them. It has given an opportunity to invest in the emerging markets and tap up the talent which is available there. In developing countries, there is often a lack of capital which hinders the growth of domestic companies and hence creates unemployment. In such cases, due to global nature of the businesses, people of developing countries too can obtain gainful employment opportunities.

c)       Investment and Capital Flows: A lot of companies have directly invested in developing countries like Brazil and India by starting production units. Companies which perform well attract a lot of foreign investment and thus push up the reserve of foreign exchange.

d)      Spread of Technical Know-How: While it is generally assumed that all the innovations happen in the Western world, the know-how also comes into developing countries due to globalisation. Without it, the knowledge of new inventions, medicines would remain cooped up in the countries that came up with them and no one else would benefited. The spread of know –how can also be expanded to include economic and political knowledge, which too has spread far and wide.

e)      Spread of Culture: Not all good practices were born in one civilization. The world that we live in today is a result of several cultures coming together. People of one culture, if receptive, tend to see the flaws in their culture and pick up the culture which is more correct or in tune with the times. Societies have become larger as they have welcomed people of other civilization and backgrounds and created a whole new culture of their own. Cooking styles, languages and customs have spread all due to globalization. The same can be said about movies, musical styles and other art forms. They too have moved from one country to another, leaving impression on a culture which has adopted them.

4. (a)  “A Cooperative Society is formed to serve its members and not to earn profit.” Do you agree with this statement? Discuss.11

Ans:

Or

(b) What is International Business? Discuss the basic features of international business.             4+7=11

Ans: International Business

Business transaction taking place within the geographical boundaries of a nation is known as domestic or national business. It is also referred to as internal business or home trade. Manufacturing and trade beyond the boundaries of one’s own country is known as international business.

International or external business can, therefore, be defined as those business activities that take place across the national frontiers. It involves not only the international movements of goods and services, but also of capital, personnel, technology and intellectual property like patents, trademarks, know-how and copyrights.

In the words of Michael R. Czinkota ,” International business consists of transactions that are devised and carried out across national borders to satisfy the objectives of the individuals, companies and organisations. These transactions take on various forms which are often interrelated.”

In the words of John D. Daniels and Lee H. Radebaugh, “ International business is all business transactions — private and governmental — that involve two or more countries. Private companies undertake such transactions for profits; governments may or may not do the same in their transactions.”

The important features of international business are as follows:

a)      Large scale operation: In international business, all the operations are conducted on a very huge scale. Production International Business and marketing activities are conducted on a large scale. It first sells its goods in the local market. Then the surplus goods are exported.

b)      Integration of economies: International business integration (combines) the economies of many countries. This is because it uses finance from one country, labour from another country, and infrastructure from another country. It designs the product in one country, produces its part in many different countries and assembles the product in another country. It sells the product in many countries, i.e. in the international market.

c)       Dominated by developed countries and MNCs: International business is dominated by developed countries and Japan dominated (fully control) foreign trade. This is because they have large financial and other resources. They also have the best technology and research and development (R & D). They have highly skilled employees and managers because they give very high salaries and other benefits. Therefore, they produce good quality goods and services at low prices. This helps them to capture and dominate the world market.

d)      Benefits to participating countries: International business gives benefits to all participating countries. However, the developed (rich) countries get the maximum benefits. The developing (poor) countries also get benefits. They get foreign capital and technology. They get rapid industrial development of the developing countries. Therefore, developing countries open up their economies through liberal economic policies.

e)      Keen competition: International business has to face keen (too much) competition in the world market. The competition is between unequal partners i.e. developed and developing countries. In this keen competition, developed countries and their MNC s are in a favourable position because they produce superior quality goods and services at very low prices. Developed countries also have many contacts in the world market. So, developing countries find it very difficult to face competition from developed countries.

f)       Special role of science and technology: International business gives a lot of importance to science and technology. Science and Technology (S & T) help the business to have large-scale production. Developed countries use high technologies. Therefore, they dominate global business. International business helps them to transfer such top high-end technologies to the developing countries.

g)      International restrictions: International business faces many restrictions on the inflow and outflow of capital, technology and goods. Many governments do not allow international businesses to enter their countries. They have many trade block, tariff barriers, foreign exchange restrictions, etc. All this is harmful to international business.

h)      Sensitive nature: The international business is very sensitive in nature. Any changes in the economic policies, technology, political environment, has a huge impact on it. Therefore, international business must conduct marketing research to find out and study these changes. They must adjust their business activities and adapt accordingly to survive changes.

5. (a) Discuss the various steps involved in the ‘Decision-making Process’.          11

Ans: Steps Involved In Decision Making Process

Decision-making involves a number of steps which need to be taken in a logical manner. This is treated as a rational or scientific 'decision-making process' which is lengthy and time consuming. Such lengthy process needs to be followed in order to take rational/scientific/result oriented decisions. Drucker recommended the scientific method of decision-making which, according to him, involves the following six steps:

1.       Identifying the Problem: Identification of the real problem before a business enterprise is the first step in the process of decision-making. It is rightly said that a problem well-defined is a problem half-solved. Information relevant to the problem should be gathered so that critical analysis of the problem is possible. This is how the problem can be diagnosed. Clear distinction should be made between the problem and the symptoms which may cloud the real issue.

2.       Analyzing the Problem: After defining the problem, the next step in the decision-making process is to analyze the problem in depth. This is necessary to classify the problem in order to know who must take the decision and who must be informed about the decision taken. Here, the following four factors should be kept in mind:

1.       Futurity of the decision,

2.       The scope of its impact,

3.       Number of qualitative considerations involved, and

4.       Uniqueness of the decision.

3.       Collecting Relevant Data: After defining the problem and analyzing its nature, the next step is to obtain the relevant information/ data about it. There is information flood in the business world due to new developments in the field of information technology. All available information should be utilised fully for analysis of the problem.

4.       Developing Alternative Solutions: After the problem has been defined, diagnosed on the basis of relevant information, the manager has to determine available alternative courses of action that could be used to solve the problem at hand. Only realistic alternatives should be considered. It is equally important to take into account time and cost constraints and psychological barriers that will restrict that number of alternatives.

5.       Selecting the Best Solution: After preparing alternative solutions, the next step in the decision-making process is to select an alternative that seems to be most rational for solving the problem. The alternative thus selected must be communicated to those who are likely to be affected by it. Acceptance of the decision by group members is always desirable and useful for its effective implementation.

6.       Converting Decision into Action: After the selection of the best decision, the next step is to convert the selected decision into an effective action. Without such action, the decision will remain merely a declaration of good intentions. Here, the manager has to convert 'his decision into 'their decision' through his leadership.

7.       Ensuring Feedback: Feedback is the last step in the decision-making process. It is like checking the effectiveness of follow-up measures. Feedback is possible in the form of organised information, reports and personal observations. Feed back is necessary to decide whether the decision already taken should be continued or be modified in the light of changed conditions.

Every step in the decision-making process is important and needs proper consideration by managers. This facilitates accurate decision-making.

Or

(b) Briefly explain the different bases of departmentation.        11

Ans: Departmentation: The process of dividing activities into units and subunits is referred to as departmentation. The term departmentation is used in a generic sense n is not only confined to the creation of such units as are called departments, but it includes divisions, sections and jobs also.

Dividing up work calls or identification of total activities and classification of such activities into units and subunits. There are three bases for primary grouping of activities at the second level of the organisation just below the top level. Units at the second level are commonly called departments when business functions are adopted as the pattern of grouping activities. Such units go by the name of divisions when either products manufactured or territories are adopted as the means of classifying activities.

There are, however, two approaches to departmentation- top down and bottom-up approaches. In the top-down approach, activities are divided step by step downward form the chief executive's job to the operating jobs. In the bottom-up approach, the division of activities is carried on in a reverse order. Starting form operating jobs, there arise sections form combining some correlated jobs, departments from combining some sections and finally the chief executive position form putting departments together. While the top-down approach gives emphasis on co-ordination and managerial action, the bottom-up approach gives emphasis on co-ordination and managerial action, the bottom-up approach focuses attention on employee performance. Although the top-down approach is easy for understanding the departmentation process, both the approaches are utilized in actual practice

Bases or Methods of departmentation

Departmentation provides motivation by developing feeling of autonomy to the extent possible. There are several bases of departmentation. The more commonly used bases are function, produt, territory, process, customer, time etc. Some of these bases are internal-operation – oriented like function, process, time while others like product, territory and customer are output-oriented.

a.       Functional Departmentation: The grouping of common or homogeneous activities to form an organisation unit is known as functional departmentation. Functional departmentation is the most widely used basis for organising activities and is present almost in every large organisation at some level.

Functional departmentation is most commonly used because it offers certain advantages which include advantages of specialization, ensuring performance of activities necessary for the achievement of organisational objectives, elimination of un-necessary activities, easier control over functions, easier way for pinpointing training need of the managers and maintaining the relative importance of functions in the organisation.

b.      Product wise departmentation: Product departmentation involves the grouping together of all activities necessary to manufacture a product or product line. Product departmentation is preferred for product expansion and diversification when manufacturing and marketing characteristics of each product are of primary concern. Product departmentation offers several advantages places attention to product lines, reduces problems of coordination for different products, provides opportunities for further diversification and expansion of organisation and provides product specialization necessary for managers specially when each product is different from other.

c.       Territory – wise Departmentation: Territorial or geographical departmentation is specially useful to large-sized organisations having activities which are physically  or geographically spread such as banking, insurance, transportation etc., Territorial departmentation provides certain efficiency in operation. Local factors such as customers, culture, styles, preferences etc., always affect organisational functioning.

d.      Production processes – wise departmentation: In  process departmentation, processes involved in production or various types of equipments used are taken as basis for departmentation. When the production activities involve the use of several distinctive processes, these can be used as the base for grouping of activities. Such activities may be textiles, oil production etc., The process are set in such a way that a series of operations is feasible making operations economic. It provides advantages of specialization required at each level of total processes, maintenance of plant can be done in better way, and manpower can be utilized effectively.

e.      Customer – wise departmentation: Customer based departmentation is  basically market – oriented in which departments are created around the markets served or around marketing channels. The basic idea of this departmentation is to provide services to clearly identified groups of customers. Each group of customers has different purchase behavior, payment schedule, demand pattern etc., Therefore they can be attracted to the organisation’s business by satisfying them by providing services, payment schedule demand pattern etc.

6. (a) Evaluate the Abraham Maslow’s theory of motivation.                      11

Ans: Maslow's Hierarchy of Needs

Maslow Abraham proposed his theory in the 1940s. This theory, popularly known as the Hierarchy of Needs assumes that people are motivated to satisfy five levels of needs: physiological, security, belongingness, esteem and self-actualization needs. The figure 9.1 shows Maslow's hierarchy of needs

9

 

Maslow suggested that the five levels of needs are arranged in accordance with their importance, starting from the bottom of the hierarchy. An individual is motivated first and foremost to satisfy physiological needs. When these needs are satisfied, he is motivated and 'moves up' the hierarchy to satisfy security needs. This 'moving up process continues until the individual reaches the self-actualization level.

a)      Physiological needs: Physiological needs represent the basic issues of survival such as food, sex, water and air. In organisational settings, most physiological needs are satisfied by adequate wages and by the work environment itself, which provides employees with rest rooms, adequate lighting, comfortable temperatures and ventilation.

 

b)      Security or safety needs: Security or safety needs refer to the requirements for a secure physical and emotional environment. Examples include the desire for adequate housing and clothing, the need to be free from worry about money and job security and the desire for safe working conditions. Security needs are satisfied for people in the work place by job continuity, a grievance resolving system and an adequate insurance and retirement benefit package.

 

c)       Social needs: Belonging or social needs are related to the, social aspect of human life. They include the need for love and affection and the need to be accepted by one's peers. For most people these needs are satisfied by a combination of family and community relationships and friendships on the job. Managers can help ensure the 'satisfaction of these important needs by allowing social interaction and by making employees feel like part of a team or work group.

 

d)      Esteem needs: Esteem needs actually comprise of two different sets of needs:

i.         The need for a positive self-image and self-respect.

ii.       The need for recognition and respect from others.

Organisations can help address esteem needs by providing a variety of external symbols of accomplishment such as job titles and spacious offices. At a more fundamental level, organisations can also help satisfy esteem needs by providing employees with challenging job assignments that can induce a sense of accomplishment.

e)      Self-actualization needs: At the top of the hierarchy are those needs, which Maslow defines the self-actualization needs. These needs involve realizing one's potential for continued: growth and individual development. Since these needs are highly individualized and personal, self-actualization needs are perhaps the most difficult for managers to address. Therefore, an employee should try to meet these needs on his own end.

However, an organisation can help his employee by creating a climate for fulfillment of self-actualization needs. For instance, an organisation can help in fulfillment of these needs by encouraging employee’s participation in decision-making process and by providing them with an opportunity to learn new things about their jobs and organisation. This process of contributing to actual organisational performance helps employees experience personal growth and development associated with self-actualizing.

Critical Analysis of Maslow’s Theory

A number of research studies have been undertaken to see the validity of hierarchy of needs. Lawler and Suttle collected data on 187 Managers in two different organisations for a period of six months to one year. No evidence was found to support Maslow's theory. They found there were two levels of needs-biological and other needs- and that other needs would emerge only when biological needs were reasonably satisfied. A survey conducted in India of 200 factory worker revealed that they give top priority to job security, earnings and personal benefits-all lower other needs.

It is generally seen that needs do not follow Maslow's hierarchy. The hierarchy is determined by individuals differently. They proceed to follow their own pattern of needs satisfaction. Some people may try for self-actuating needs rather than lower needs. For some persons esteem needs are more important than social needs.

There is no cause effect relation between and need and behavior. A particular need may cause behavior in different ways in different person. Similarly, one particular behavior may result due to different needs. It is said that higher needs motivate a person when lower needs are reasonably satisfied. The word 'reasonably satisfied' is a subjective matter. The level of satisfaction may be different for persons.

Or

(b) Discuss the various steps of the process of control.  11

Ans: Steps in Controlling Process

In order to perform his control functions, a manager follows three basic steps. First of all, he establishes the standards of performance to ensure that performance is in accordance with me plan. After this, the manager will appraise the performance and compare it with predetermined standards. This step will lead the manager to know whether the performance has come up to the expected standard or if there is any deviation. If the standards are not being met, the manager will take corrective actions, which is the final step in controlling.

controllingprocess

1)      Establishing standards: A standard acts as a reference line or basic of comparison of actual performance. Standards should be set precisely and preferably in quantitative terms. It should be noted that setting standards is also closely linked with and is an integral part of the planning process. Different standards of performance are set up for various operations at the planning stage, which serve as the basis of any control system. Establishment of standards in terms of quantity, quality or time is necessary for effective control. Standards should be accurate, precise, acceptable and workable. Standards should be flexible, i.e., capable of being changed when the circumstances require so.

2)      Measurement of performance: This step involves measuring of actual performance of various individuals, groups or units and then comparing it with the standards, which have already been set up at the planning stage. The quantitative measurement should be done in cases where standards have been set in quantitative terms. In other cases, performance should be measured in terms of quantitative factors as in case of performance of industrial relations manager. Comparison of performance with standards is comparatively easier when the standards are expressed in quantitative terms.

3)      Comparison: This is the core of the control process. This phase of control process involves checking to determine whether the actual performance meets the predetermined or planned performance. Manager must constantly seek to answer, “How well are we doing?” When a production supervisor checks the actual output or performance of his department with the production schedule, he is performing comparison aspect of control. When-an executive calculates the performance of his subordinates once in six months or   annuity, he is performing comparison aspect of control. Checking return on in investment is a comparison phase of control.

4)      Taking corrective action: The final step in the control process is taking corrective actions so that deviations may not occur again and the objectives of the organisation are achieved. This will involve taking certain decision by the management like re-planning or redrawing of goals or standards, assignment of clarification of duties. It may also necessitate reforming the process of selection and the training of workers. Thus, control function may require change in all other managerial functions. If the standards are found to be defective, they will be modified in the light of the observations.

7. (a) Describe the nature and importance of marketing.                              6+6=12

Ans: Marketing: Marketing is an ancient art and is found everywhere. Formally or informally, people and organizations engage in a vast numbers of activities relating to exchange of goods and services that could be called marketing. Marketing is a social process by which individuals and groups obtain what they need and want through creating, offering and freely exchanging products and services of value with others. Marketing deals with identifying and meeting human and social needs or it can be defined as “meeting needs profitably”.

In the words of Philip Kotler, “Marketing is human activity directed at satisfying needs and want through exchange process.”

From the above discussion, we can say that marketing is the process of exchange of goods and services and includes all those activities which helps in exchange of goods and services.

Nature of marketing

Buyer and seller affect the demand for products in aggregate areas, market includes both the place and region which buyers and sellers are in a free inter course with another.

1) Marketing is a customer focus: Market intense to satisfy and delight the customer, the activities of marketing must be directed and focused at the customer marketers can remain in customers mind. As they are provided value for what they spend.

2) Marketing must deliver value: Marketer has to track customer needs and deliver the product as per their requirement. The co operate storage must be aimed at delivering greater customer value than competitors.

3) Marketing is business: When a customer is the focus of all activities the marketer has not to search customer to see response to his product. Customer group is decided from whom the product is prepared and presented.

4) Marketing is surrounded by customer need: Marketing starts with identification of customer needs and requirements’. These are termed into probable features that might satisfy the basic needs

5) Marketing is a part of total environment: Total environment mainly defined as the combination of all resources and institutions which are directly related to the production, distribution of goods, services, ideas, places and persons for satisfaction of human needs.

6) Marketing systems effect companies strategies: Marketing has its own sub-systems which interact with each other to turn complete marketing system that is responsible to company’s marketing strategy.

Importance and Uses of Marketing (Role of Marketing)

Marketing is a unique function of business which satisfies social values, needs and wants of an individual. It serves as the springboard for all industrial production. The importance of marketing can be studied under the following heads:

A. Uses to the Society

(1)   Employment of Various Persons: Since the things are manufactured or produced due to marketing, hence many people get employment through the production activities. Transport, storage and wholesale and retail services cover many persons. In this way, it might be said that by marketing the employment is created.

(2)  Availability of Various Products for Use: Today, the sphere of marketing has become worldwide or international. Due to it, the products manufactured in the foreign lands too become avail­able for consumption. All this could become possible due to the growth of the marketing and its development.

(3)  Increase in the National Income of Country: If the marketing activities are efficiently undertaken and things are produced in accordance with the needs or requirements of the cus­tomers, there must be some increase in the demand of the things. The production goes up which leads to the increase in the national income.

B. Uses to the Producers

(1)   Helpful in Earning More Profits: Whenever any manu­facturer produces some commodity, he has to seek the help of so many people in letting the same reach the hands of the consumers. For instance, there is the need of the middlemen, the godown ­owners, the traders, the owners of transport companies, etc. By establishing proper distribution channel, more profits can be earned.

(2)  Getting Information Regarding Demand. By the study of marketing, the producers are able to get information regard­ing the changing demands.

C. Uses to the Consumers

While purchasing the products, the consumers must have full knowledge of the things. This can be possible only through marketing. By the study of marketing, the consumer is able to acquire knowledge as to how the middlemen resort to their exploitation. For avoiding the middlemen's exploitation, the con­sumer co-operative societies are being promoted and developed.

D. Uses to the Middlemen

By the 'middlemen' is meant those persons who send the products from the producer to the consumer. The lower are the ex­penses of the middlemen, the greater is their profit. By studying the marketing, they get the knowledge as to how the expenses of dis­tribution be kept lower. Unless the middlemen possess sufficient knowledge of marketing, they can't become successful.

E. Uses to the Nation

With the help of marketing, in the progressive and developing countries too, good managers and entrepreneurs can be encou­raged. For resorting to the most efficient use of the resources avail­able in the country, marketing of the commodities is very necessary. By the study of marketing, the economy could be kept safeguarded against the evil effects of instability. Only due to the marketing, the processes of production and distribution continue to exist. In it the condition of full employment could be achieved. Really speaking, marketing occupies an important role in the economic development.

Or

(b) What do you mean by ‘FinancialManagement’? Briefly discuss itsobjectives.                             4+8=12

Ans: Meaning and Definitions of Financial Management/Business Finance/ Corporation Finance

Financial management is management principles and practices applied to finance. General management functions include planning, execution and control. Financial decision making includes decisions as to size of investment, sources of capital, extent of use of different sources of capital and extent of retention of profit or dividend payout ratio. Financial management, is therefore, planning, execution and control of investment of money resources, raising of such resources and retention of profit/payment of dividend.

Howard and Upton define financial management as "that administrative area or set of administrative functions in an organisation which have to do with the management of the flow of cash so that the organisation will have the means to carry out its objectives as satisfactorily as possible and at the same time meets its obligations as they become due.”

According to Guthamann and Dougall,” Business finance can be broadly defined as the activity concerned with the planning, raising, controlling and administering the funds used in the business.”

Bonneville and Dewey interpret that financing consists in the raising, providing and managing all the money, capital or funds of any kind to be used in connection with the business.

Osbon defines financial management as the "process of acquiring and utilizing funds by a business”.

Considering all these views, financial management may be defined as that part of management which is concerned mainly with raising funds in the most economic and suitable manner, using these funds as profitably as possible.

Need/Objectives of Business Finance

Business finance is required for the establishment and existence of every business organization. Finance is required not only to start the business but also to operate it, it expand for modernize its operations and to secure stable growth. The importance of business finance arises basically to bridge the time gap. Manufacturers require business finance to bridge the time gap between the purchase of raw material and other supplies for production and recovery of sales. Traders require finance to bridge the time gap between the purchase of goods and recovery of sales. The need for business finance arises for the following purposes:

1.       To acquire Fixed Assets: Every business organization whether manufacturing or trading needs finance to acquire some fixed assets. Manufacturers need finance to acquire land & building, plant & machinery, furniture etc. Traders need finance to acquire shops for sale of goods, godown for storage of goods and vehicles for distribution of goods.

2.       To purchase raw materials/goods: Manufacturers need finance to acquire raw-materials and consumable stores for production. Traders need finance to acquire goods for distribution.

3.       To acquire service of human being: Manufacturers need finance to pay their workers, supervisors, managers and other staff employed by them. Traders need finance to pay their staff employed by them.

4.       To meet other operating expenses: Every organization needs finance to meet day to day other operating expenses like payment for electricity bills, water bills, telephone bills, travelling & conveyance of staff, postage & telegram expenses & so on.

5.       To adopt Modern Technology: With fast changing technology, business organizations need finance to modernize their plans & machineries, production methods and distribution methods. An enterprise may decide to replace outdated and obsolete assets with new assets to operate more economically.

6.       To meet contingencies: Every organization needs finance to meet the ups and downs of business and unforeseen problems.

7.       To expand existing operations: Every organization needs finance to expand its existing operations. For example, a company manufacturing Pen Drives at a rate of 10,000 per day needs finance to increase its plant capacity to manufacture 20,000 Pen Drives per day.

8.       To diversity: Every organization which decides to diversify needs finance to add new products to the existing line. For example, the company manufacturing Pen Drive needs finance to add new products say Ganga Water.

9.       To avail of business opportunities: Finance is required to avail of business opportunities. For example, where raw-materials are available at heavy cash discounts, the enterprises need finance to avail of this opportunity.

Finance is said to be life blood of business. It is required not only at the time of setting up of business but at every stage during the existence of business. It must be available at the time when it is needed. It must also be adequate for the purpose for which it is needed. Thus, finance is required to bring a business into existence, to keep it alive and to see it growing. Men, materials, machinery and managers can be brought together and engaged in business when adequate finance is available. Many business firms are known to have failed mainly due to shortage of finance. The importance of finance has increased in modern times for two reasons viz., (i) the business activities are now undertaken on a much larger scale than in the past, and (ii) the manufacturing process has become more complex than it used to be. With the growth in size and volume of business and with the increasing complexity of production and trade there is growing need for finance.

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